Higher taxes ease rise in welfare and health spending – Daily Business

The Scottish government’s deficit remains in double figures (pic: DB Media Services)

Spending was £2,720 per person higher in Scotland than the rest the UK last year as a result of increases in welfare and health budgets.

However, higher revenue, mainly national insurance contributions, helped offset the rise in expenditure and reduced the overall deficit by £600 million.

New figures show £22,281 per head was spent in Scotland compared to £19,561 across the UK. The largest annual increase in total spending was in “social protection”, including action on poverty (+£2.1bn), and health (+£1.5 bn).

Spending rose by £5.7bn (4.8%) in 2025-26 to £123.6bn while revenue totalled £98.3bn, an increase of £6.3bn (6.9%).

This helped to marginally reduce the notional deficit to £25.3bn or 10.9% of GDP (down from 11.5%), compared with 4.2% for the UK. This is an improvement of 0.6 percentage points in Scotland compared with a 1.0 percentage point improvement for the UK).

Revenue raised from the North-Sea totalled £3.2bn, or 3.2%, of all revenue raised in Scotland. Excluding the North Sea it was £95.1bn, an increase of 7.6%. This represents 7.7% of all UK non-North Sea revenue raised.

Revenue per person in Scotland (£17,718) was similar to the UK average (£17,720) in 2025-26, when North Sea revenue is included.

The largest increases in revenue in Scotland came from the UK government’s rise in national insurance contributions (+£2.4bn) and income tax receipts (+ £1.5bn) following the Scottish Government’s decision to freeze the higher, additional, and top rate of Scottish Income Tax. It also reflects the continuing effects of inflation and strong nominal earnings growth.

The largest decrease in revenue was in North Sea taxes (-£0.4bn), which reflects falling oil and gas prices during the year.

Devolved revenues raised £27.8bn in 2025-26, an annual increase of £2.1bn (8.2 %). These revenues include Council Tax, Non-Domestic Rates, Land and Building Transaction Tax, Scottish Landfill Tax and Scottish Income Tax.

Commenting on the Government Expenditure and Revenue Scotland (GERS) figures, Alastair Cameron, chair of anti-independence group Scotland in Union, said: “Year after year these figures provide a rock-solid case for Scotland’s place in the United Kingdom.

“The nationalists may be in perpetual denial about it, but there’s no doubting that Scots benefit enormously from being part of the UK.

“It means Scotland has billions of pounds extra to spend on vital public services, and it’s one of the main reasons why Scots repeatedly reject the SNP’s demands to break up Britain.

“The SNP have no answer when it comes to filling this gigantic financial gap, and their continual refusal to do so underlines yet again how threadbare their case for independence is.”

Jenny Gilruth: we are delivering (pic: DB Media Services)

Deputy First Minister and Finance Secretary Jenny Gilruth said: “The latest GERS stats show that total and devolved revenues grew faster than spending – showing in particular that in the areas where our Government has control, we are delivering sustainable finances.

“The significant increase in income tax revenues shows that the decisions which this Government has taken are helping to deliver additional funding for measures to ease the cost of living like the Scottish Child payment, free prescriptions, bus travel for under-22s and free university education.

“GERS provides notional estimates for Scotland’s deficit as part of the UK – it simply does not show what an independent Scotland’s position will be. 

“With the powers of independence we would be able to chart a different path, ensuring we grow the economy to allow Scotland to reach her full potential.”

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